Estee Lauder’s (EL) quarterly dividend cut signals “stress continues to be persistent” on earnings and cash flow in the medium term, BofA Securities said Friday in a report.
The 5% decline in fiscal Q1 organic sales, led by weaker-than-expected figures in China and Asia travel retail, compared with the firm’s estimate for a 4% decline.
The firm slashed its earnings per share forecast to $1.50 for fiscal 2025 from $2.80 and cut the fiscal 2026 projection to $2.95 from $$4.55. The fiscal 2027 outlook fell to $3.50 from $5.20.
The dividend cut “implies a return to $3.50 of EPS over time assuming a 40%
payout ratio,” the report said.
BofA lowered its price target for the stock to $75 from $100 and reiterated its neutral rating.
“With China still decelerating and uncertain and a new CEO starting in January, it seems premature to ‘buy the dip’ at this point,” BofA said.